None of us want to think about our own death, but preparing for it is essential if you want to prevent your family from being left with bills that they can’t afford to pay. One of the best ways to ensure that your family is protected is to purchase a life insurance policy. The cash value of your policy will be paid out to your beneficiaries to be used for everything from burial expenses to mortgage payments. Life insurance coverage can give you peace of mind since you’ll know that your family will be taken care of, even after you pass away. If you’re thinking about a policy, read on to learn more about what situations you’ll want your life insurance to cover.
How does a life insurance policy work?
The primary reason to purchase life insurance is that it will pay those you select as beneficiaries a lump sum in the event of your death. Typically, people choose their families to receive the payment, but you can discuss your options with your insurer if you aren’t sure who should be the beneficiary of your policy. The reality is that after you pass on, especially if you’re the primary breadwinner in your family, the people you love may find themselves in a precarious financial situation. Funeral costs alone can end up being thousands of dollars.
A life insurance policy will give your beneficiaries money to cover your funeral and burial, mortgage payments, child care, school tuition, and other day-to-day living expenses. Claims can be filed upon the event of your death or diagnosis of a terminal illness. The amount of money you’ll receive from your claim and when it will be accepted will be determined by the terms of your policy. Your policy’s product disclosure statement (PDS) will outline all the details and exclusions, so read it carefully before you sign up.
What situations do you definitely want your insurance to cover?
Deciding how much coverage to purchase depends on a number of factors. There are several different types of life insurance, beyond just standard life insurance coverage. You may also want to consider total and permanent disability (TPD) insurance, income protection insurance, or trauma insurance. A TPD policy will cover you in the event that you sustain a permanent illness or injury. TPD insurance provides monetary support to cover a portion of your medical or disability expenses.
Each insurance provider defines total and permanent disability differently, so ask about what your policy covers. The amount of benefit you receive will depend on factors like whether or not you can continue on in your current occupation, how well you can perform day-to-day tasks, and your ability to handle normal domestic duties. In the event that you’re ill or injured temporarily, income protection and trauma insurance can offer additional security for you and your family.
Income protection insurance will pay out up to 70% of your pre-tax income over the course of a set period of time during which you are unable to work due to partial or total disability. It can be used to manage the expenses you’ll have while at home and in recovery. Trauma insurance pays out a lump sum in the event that you are critically ill or injured and unable to perform the duties of your job.
Life insurance can cover many different events or situations, you’ll just need to decide what level of coverage is best for you and your family. Additionally, you may want to consider other life policies that will allow you to file a claim and receive financial support if you are disabled on a temporary or permanent basis. The terms and conditions for these policies can vary significantly, so make sure you understand all of the fine print. There’s nothing you can do to ease the pain of your family’s loss, but you can provide financial security if you invest in a good life insurance policy.